Chapter 7 Bankruptcy Houston
Chapter 7 is sometimes called basic bankruptcy.
The typical debtor is one who has primarily unsecured debts. The
goal of a chapter 7 debtor is to claim as much property as
exempt as possible and receive a discharge. Every debtor is
allowed to select their exempt property. If there are no
objections to the debtor's exemptions, the debtor gets to keep
the exempted property. In Texas, a debtor gets to choose between
the state exemptions or the federal exemptions. Your bankruptcy
attorney will make the decision as to which exemptions laws are
most favorable in your case.
Under Chapter 7, the Court appoints a trustee to collect and
sell, if economically feasible, all property a debtor owns that
is not exempt property. Within approximately 40 days of your
bankruptcy filing, the chapter 7 trustee will hold a meeting of
your creditors. The debtor must attend the First Meeting of
Creditors. Your social security card and a picture
identification will be required. At this meeting, the debtor
will be examined under oath by the chapter 7 trustee.
Thereafter, if there are no timely objections to discharge, the
court will grant the debtor a discharge from all dischargeable
debts. The bankruptcy discharge stops all creditors whose debts
are discharged from instituting or continuing any action or
employing any process or engaging in any act to collect the
discharged debts. A debtor can receive a chapter 7 discharge
once every six (6) years.
There are two types of non-dischargeable debts in a chapter 7
case. The first type is debts, which are automatically
non-dischargeable and these include, but are not limited to:
most tax debts;
debts owed to a spouse, former spouse, or child for alimony,
maintenance or support
most debts for fines, penalties, or forfeitures payable to and
for the benefit of a governmental unit;
student loans insured by a state or federal unit;
debts for death or personal injury caused by an intoxicated
driver of a vehicle\boat;
debts incurred to pay a non-dischargeable tax.
The second type is debts which must be proven to be
non-dischargeable in the court, i.e., the debtor is sued for:
debts based on fraud or false pretenses;
defalcation in a fiduciary capacity;
debts for willful and malicious injury
Debtors may lose their discharge because of something they did
wrong. Usually, this involves a debtor's misconduct which
threatens the honesty of the bankruptcy system and often
constitutes criminal offenses as well. A discharge may be denied
if the debtor, for example, destroys or conceals property,
destroys, conceals or falsifies records, or makes a false oath.
In a chapter 7, a debtor may chose to reaffirm certain debts.
Reaffirming a debt means that the debtor signs and files with
the court a legally enforceable document, which states that the
debtor promises to repay all or a portion of the debt that may
otherwise have been discharged in the bankruptcy case.
Reaffirmation agreements must generally be filed with the court
within 60 days after the first meeting of creditors. If the
debtor signs a reaffirmation agreement, the same may be
cancelled at any time before the court's discharge order or
within 60 days after the filing of the agreement, whichever is
later.
Reaffirmation agreements are strictly voluntary and are not
required by the Bankruptcy Code and other state or federal law.
A reaffirmation agreement must not be burdensome on the debtor
and must be in the debtor's best interest. If a debtor reaffirms
a debt and then fails to make the payments required in the
reaffirmation agreement, the creditor can still enforce its lien
on the collateral that was given as security for the debt, and
the debtor may remain personally liable for any remaining debt.
If the court finds that a debtor's case would constitute a
substantial abuse, the court will dismiss the case. The
substantial abuse concept applies only to a debtor who owes
primarily consumer debts. In such a case, the court will
determine whether the debtor can afford to repay a portion of
his debts under chapter 13 payment plan.
The debtor can choose what chapter of the Bankruptcy Code is
bested suited for the debtor's needs. Even if a chapter 7 case
has been filed, the debtor may be eligible to convert the
chapter 7 to a different chapter.
